Peanut program change starts scramble

“We peanut growers have always said if we could get 75 cents for cotton, we'd rather grow cotton,” says Murray Campbell.

“With $3.55 peanuts and 80-cent cotton, it's going to be interesting to see the choice many growers make in 2004,” the Camilla, Ga., farmer told members of the Southern Crop Production Association at their recent annual meeting at Hilton Head, S.C.

“We've never before had a situation where price would be the determinant of what we plant,” said the research chairman of the National Peanut Board.

The past year has seen “a true paradigm shift” and “cataclysmic changes” in the government peanut program, Campbell said.

“We took a program that had worked well for 60 years — at no net cost to the government — and we changed to one that is very expensive for the government and that a lot of people in the industry didn't want to change.”

The key reason, Campbell said: “When the U.S. passed NAFTA (the North American Free Trade Agreement), it nailed the coffin shut on the American peanut industry…and Mexican peanuts would be coming in cheaper than U.S.-grown quota peanuts. We were in a situation where we were going to lose the U.S. peanut industry because of the changes from NAFTA.”

Then, he said, the World Trade Organization began negotiating other trade agreements that would have brought Argentina's and Brazil's peanut production capability into the same tariff situation, “which would have made us unable to complete.”

‘Get in boat’

It was suggested, Campbell said, that the peanut sector take a look at the cotton program as a model, “and several congressmen were telling us we needed to get in the boat with everyone else in terms of the farm program so we could have uniform advocacy across agriculture. That's what we must have if we're to maintain some kind of farm program to support rural economic development.”

U.S. peanut farmers can't compete with Chinese farmers, Campbell said. “We care about our labor, and we care about our environment, and we have many regulatory costs they don't have. We're competing on a world market with countries that don't care about these things, and it creates a real problem.”

Another complication, he noted, is that as much as 70 percent of the U.S. peanut quota is owned by persons not working the land. “That meant that the 30 percent of us actually farming the land were having to rent quota from absentee landlords. Peanut quotas began to move all around the belt, and all of a sudden we were paying 10 cents to 14 cents for quota rent, which meant we were getting $340 a ton for our peanuts when the world market price was $350.

“We were fortunate that, at the time, there was a government surplus and we were able to work out a quota buyout to compensate some of the absentee owners.”

As a result of program changes, Campbell said, peanut growers started the 2002 crop under one government program and finished under another.

Getting better

“There have been a lot of problems — loan, and money flow, and we got killed on seed costs — but things are getting better.

“We have people in Virginia who say they can't grow peanuts under this program, and acreage in that state has dropped from 60,000 to 33,000. But people in South Carolina said, hey, this looks pretty good, and their acreage has gone up from 8,000 to 13,000. I think we'll continue to see acreage shifts from state to state as people look for alternatives and rotational options.”

The new peanut bill, Campbell said, has worked well in protecting U.S. growers from cheap imports.

“It was designed to enhance our ability to participate in the world market, but it's so complicated we can't figure it out. It has created disruption in the market and is driving all peanuts into the loan, where they're just sitting and aren't being brought out. The loan repayment rate has become the market, which is creating a real problem, particularly with exports.”

U.S. peanuts can't get into the European market any more, Campbell says. “It's a 500,000-ton market, which represents 333,000 acres of peanuts, and we can't compete. The Chinese have been kicking our cans pretty well over there. We're down 48.2 percent on exports under the new program.”

Domestically, it's a different story.

“Manufacturers have done exactly what they said they would if the program passed. We're seeing some tremendous movement of peanuts — double-digit growth. They're putting money into research and development, bring new products out almost daily, and doing a lot of advertising.”

The repayment rate, Campbell says, is “the number one issue in implementation of the program. How we're going to solve it, I don't know. But when we do that, I think the peanut program will be something everyone can be happy with, and that it will help us for a long time.”